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German coffee market after unification.

German coffee market after unification

It seems 10 million bags net import of green coffee came within the country's grasp. In 1990, 9,679,063 bags (580,43 metric tons) have been declared for the united German coffee market; a U.S. net imports (21,333,000). This equals an increase of 16.1% over 1989's result of 8,337,292 bags (500,238 tons).

The German trading houses have registered a considerable increase in foreign trade compared to previous years. Net imports (temporary quantities excluded) of non-decaffeinated green coffee rose from 500,238 tons in 1989 to 580,743 tons; decaffeinated green coffee net imports increased from 446 tons to 542 tons. At the same time, net export of non-decaffeinated green coffee rose 62% in comparison to 1989. This figure does not include sales within transit trade which is very important

Consumption Up

All in all, the coffee market in united Germany from the view of consumption, amounted to 590,500 tons (on green coffee basis). Slight differences to the above figures derive from some direct. imports into the former GDR in early 1990. The large increase in comparison to 1989 (496,000 tons) is due to consumption in the new "Bundeslander", which have been supplied to approximately 95% by West German roasters in 1990. About 469,000 tons of roasted coffee and 12,500 tons of soluble coffee have been consumed. The increase in the old "Bundeslander" lays somewhat around 1%. The total turnover on Germany's coffee market amounted to 8.1 billion DM in 1990. Of these sales, the household market accounts for 6.6 billion DM. Even though the overall per capita consumption in Germany dropped from 8 kgs (on green coffee basis), in 1989 to 7.4 kgs in 1990, an increase from 4.9 kgs to 5.8 kgs could be noticed in the new "Bundeslander".

It is very difficult to compare the situation before and after unification. The old figures of our statistics only include the old "Bundeslander" and the official figures in the statistics of the GDR are not necessarily in agreement with real consumption.

Comparing the consumption on green coffee basis has to take into account that losses during the roasting process have been higher due to over-aged equipment and figures were based on production. In the past, it could never be analyzed in West Germany how much coffee had been send to East Germany. Due to exact records of Stasi, we can retrospectively determine the amount of coffee sent via parcel to GDR of between 7,000 and 8,000 tons. In can also be said that 3,5000 tons have been sold in intershop. GDR statistics indicate the supply with roasted coffee as follows:

1980 - 47,000 tons

1985 - 58,000 tons

1988 - 62,000 tons

1989 - 60,000 tons

At the end of 1989 and during the first month of 1990, citizens of the new "Bundeslander" bought considerable amounts of coffee in the old "Bundeslander". This has to be taken into account in view of consumption. It can be estimated that already during the last two month in 1991, after the border had been opened, 4,000 tons have been sold to visitors from the former GDR. In 1990 another 16,000 tons have been bought. In 1991, there will be very little direct purchases in the old "Bundeslander" as supply is now ensured.

Interesting is also the analysis of coffee segments. The percentages differ considerably in the old and new "Bundeslander." Consumption habits in the old "Bundeslander" continuously show a growing interest for treated and naturally mild coffees (54%) while those reached a meager share of 13 % in the new "Bundeslander." The share of untreated and non-mild coffees is consequently almost twice as high.

The market segments clearly show: The citizens of the new "Bundeslander" like their coffee strong with caffeine! About 93% of the roasted coffee was untreated. Only 3% decaffeinated and 4% mild treated.

Comparing total figures of 1989 and 1990, one has to keep in mind that the 1989 figures do not include the new "Bundeslander". The development can therefore not really be compared, but the development in the old "Bundeslander" can be better demonstrated when comparing the old 1989 figures with the new ones for West Germany. In West Germany the mild coffees gained market shares and now hold a third of the market. The mild treated types developed especially well in 1990. Their share climbed up from 7% to 19% of the market.

At the beginning of the year, a considerable interest in trade-own brands could be observed. The citizens of the new "Bundeslander" were very interested in coffee at a favorable price level. Some discount chains were literally invaded. But also proprietary brands well known though western media and gifts enjoyed great popularity. In order to adapt to the habits and to use distribution facilities through trade, the typical chain house (Filialisten) introduced additionally vacuum packs "Le Cafe" and "Le Bistro" so far only on sale in the new "Bundeslander." It is evident that it needs more time and higher investments to install stores and depots.

The estimated market share of new and old East German brands is down to approximately 5%. As mentioned above, 95% of the market in Germany has been supplied by West German roasters.

Similar developments have been experienced in most sectors of economy. The reason why it hit the coffee industry so hard is probably due to its former structure; 100% centralized and reduced to production and distribution.

What was the situation like before the wall fell? What problems had to be faced after the wall had fallen and Germany unified?

First of all, all roasting plants produced the same brands. Coffee would appear in more or less similar quality and the same centrally produced packaging design in tube-pouches. Only the factory in Halle could produce vacuum bags as they delivered Intershops. Each plant produced coffee for a certain region fixed beforehand. Therefore main attention was not directed to sale. Due to the instable delivery with green coffee, packaging material, etc., the main attention was focused on supply.

The green coffee was centrally bought and distributed by VEB Nahrung-und GenuBmittel, Berlin. The roasting plants had to take what was given with no choice Exchange reasons, contractual obligations towards socialistic brother-countries such as Nicaragua, Tanzania or Angola and the status as non-member country influenced the choice of green coffee considerably. Actual sale-rates were less important than over-fullfillment of the output target set by the state. The trade had to take what was available.

Consequently, no roasting plant had a name as such. Brand names relating to a specific company did not exist. Due to non-existing competition, a special reputation could not be built up. The system did not allow anyone to create a quality image.

Apart from very few punctual exceptions, all plans are superannuated.

The citizens of the new "Bundeslander" were so sick and tired of their own limited and low quality products that they ran for western products as soon as they were available. Turnover of eastern products declined dramatically. The trade reacted and did not list products produced in E. Germany. Only after intense pressure through political sources and media did they change their tune. It is also noticeable that the citizens in the new "Bundeslander" became more and more sensible of the consequences of their own consumption habits and demand for their own products is increasing.

How can this comapny overcome these difficulties and face a well equiped expansionistic industry with a management totally unexperienced of bound enterprise?

All protectionist measures hastely taken failed. Neither the attempt to limit "exports" nor to add tremendous taxes on western roasted coffee were successful. Reality overuled all protectionistic attempts.

In order to reach a competitive level with western companies and to fulfill all forthcoming environmental requirements, high investments would be necessary. But who is willing to take the risk if the property question is unsettled? Restrictive labor-laws force to take over unrational labor, high debts - now after the currency union in DM-pend unpaid, no convincing governmental support program is in sight

More or less loose cooperation between eastern and western German companies did not turn out to be the solution for the GDR roasting plants. Such an undertaking can only be successful if the conditions are favorable. The self-healing force of many industries have been over-estimated. The following example may demonstrate the point.

A VEB roasting plant in north-east Germany was transformed into a private company. They cooperated with a western company, which generally sells whole beans. Western know-how and the brand name were introduced, but the old packages being very appropriate for whole beans were kept. Still, the customers would not accept the product, as they reminded them of the old GDR product. The western partner withdrew when it became unprofitable. That is not only the single consequence for a profit-making company but also well understandable. In other cases, cooperation involving high investments were planned and prepared but not carried out when governmental support programs making it profitable stayed away. Many employees have already been set free and that will continue when Treuhand AG, a trust administering the former state owned companies, will cease payment.

But there are also attempts to adapt to the new situation. VEB Kaffee Halle e.g. was transformed into Venag Kaffee GmbH. Meanwhile, a new assortment has been created, maintaining old quality mixtures and introducing new specialties like "African Bean." Though the plant has the advantage to possess a line for vacuum packs making it easier to adapt to western trade standards, this is under the circumstances a remarkable performance. Marketing and other areas have been adapted. In accordance to the managing director, the first quarter of 1991 has been very difficult but now trade becomes more interested in products faricated in the new "Bundeslander" and he is optimistic for the future.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Kuhrt, Cornel
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1991
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